A guess: (and note they kept youtube a wholly owned subsidiary I think) they desperately had to make sure the Viacom lawsuit defense was well funded and aggressively defended or it would severely damage Google's business.

Also, google has now had success building photo sites / photo products, but at the time of the youtube purchase, hadn't had much success building a video product.

Are you trying to imply that Youtube is a monopoly? Aren't there others like vimeo, etc.? Besides, there is nothing from technology perspective to make it a monopoly. All you need is a server rack and a bunch of web developers who can build such a site, right?

Well, there's also massive scaling, which the average web developer isn't experienced with. Then there's creating a consistent experience across various devices and browsers.

So, sure, anyway halfway competent developer could bang out a YouTube (or Facebook, etc) prototype in a few weeks, but going from there to a reliable, usable service at scale is something else altogether.

Youtube is a monopoly in a way Google is a monopoly. Just like how there's Bing and DuckDuckGo but most people use Google, most people use Youtube although some do use sites like vimeo. If you think it's so easy to build a site that competes with Google or Youtube you should go ahead and build one and overtake them. After all, nowadays everything is open sourced, you can even build your own search engine from scratch overnight.